All you ever needed to know about

Product Development
and were too shy to ask

Professor Baback Yazdani 4th November, 2008

Contents

1. Why is Product Development Important?

2. What is Product Development?
3. Generic Processes and Theory
4. Role and State of Automotive Industry
5. Product Development in Automotive Industry
6. Generalisations
7. The Shape of Things to Come
Contents

1. Why is Product Development Important?

2. What is Product Development?
3. Generic Processes and Theory
4. Role and State of Automotive Industry
5. Product Development in Automotive Industry
6. Generalisations
7. The Shape of things to come
Thought for the day:

Product Development is the key to the success,

prosperity and long-term sustainability of all
companies, organisations, and material
condition of our lives
A small mistake in Product Development
can cost the reputation of a company
The A-Class Moose Test (1997)

Mercedes Benz introduced the

A-Class in 1997 after a $1.5 Bn
Development.

The Swedish magazine,

Teknikens Vaerld (World of
Technique) tested one A-class
at 60Km/h, simulating a moose-
test, and the car flipped over!

2500 newly-sold cars were

recalled
and sales almost stopped!

Mercedes added stability control

(ESP) and redesigned the car's
suspension
Cost of Change = $ 250,000,000
A serious mistake in Product Development
can cost the company
 Story of Ford Edsel

Biggest market research and

marketing exercise in automotive
history

Development cost = $400 M

(equivalent of $6.7 Bn in 2007)

Planned to sell 200,000/year

Sold
58,000 in 1958
16,000 in 1959 Ford Edsel nearly bankrupt
Ford in the late 50s
Repeated mistakes in Product Development will
cost the company
Firestone disaster (2001)

More than 250 deaths and 700 injuries in

the US were as a result of Ford Explorers
rolling over after the tread separated on
Firestone tyres.

22 May:
Ford to replace 13 M Firestone tyres and
take a $3 Bn charge
18 July:
Ford reports $551M quarterly loss
1 Aug:
Ford's market share falls by 22%
17 Aug:
Ford cuts 10% of its white-collar workers
17 Oct:
First consecutive loss in a decade
30 Oct:
Ford CEO Jacques Nasser resigned
Logarithmic scale plot of cost of
change to fix the Firestone problem
$10,000,000,000

$1,000,000,000

$100,000,000

$10,000,000

$1,000,000

$100,000

$10,000

$1,000

$100

$10

$1
Prototyping
Concept Stage

Productionisation
Engineering

In Service
Production
Testing /
Detailed
 Cumulative Costs

0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
outcome

0%
20%
40%
60%
80%
100%
120%

Concept Stage
C
o
n
c
e
p
t
S
t
a
g
e

Full Scale F
u
l
l
S
c
al
e

D
e
v
e
l
o
p
m
en
t

Development
Committed Costs

T
e
s
t
i
n
g
/

P
r
o
t
o
t
y
p
i
ng

Testing /
Prototyping
P
r
o
d
u
c
t
i
on
i
s
a
t
i
on

Productionisation
P
r
o
d
u
c
t
i
on

S
e
r
v
i
c
e

Production
Product Development determines the

Incurred Costs

Service
Superior capability in Product Development will
renew the company and increase its profits over
time
Toyotas PD capability gives it long-
term advantage

Toyota

DOW

VW
GM

Toyotas Programme costs have been consistently 50-75% of European and US car makers

Toyotas PD lead times are nearly half those of European and US car makers

Toyotas Product Quality has consistently been at the top of JD Powers Quality Metrics
Contents

1. Why is Product Development Important?

2. What is Product Development?
3. Generic Processes and Theory
4. Role and State of Automotive Industry
5. Product Development in Automotive Industry
6. Generalisations
7. The Shape of Things to Come
Sector classification

High Complexity Low

Aerospace Fashion
High Textiles
Major Construction Cosmetics
Food / Drink
Risk

Automotive

Electronic Products Commodities

Low - Paper
White Goods - Glass
- Building Materials
Terminology

Product
Something used by a customer or something sold by an enterprise

not necessarily physical and discrete

Aircraft, kettle, components, insurance, bank account, educational programme,
training course, .

Product Development
Flow of activities from identification of market need to production and use of
product

Design
Execution of ideas, manifest in plans to deliver it
One of four fundamental processes
in business

1. Product Development
2. Product Delivery
3. Planning, Execution, and Control: Management
4. Learning

5. Support and Supply

Triangle of compromise

Time

Cost Quality
I/O of Product Development

Creativity

Technology Product Product

Development
Market Need

Capital
Further decomposition

People Transformation
Product
Product
Development
Capital Design

Technology Process Development

Delivery
Design
Process
Market Need Distribution Market
Development
Design
Outcome
Knowledge
Contents

1. Why is Product Development Important?

2. What is Product Development?
3. Generic Processes and Theory
4. Role and State of Automotive Industry
5. Product Development in Automotive Industry
6. Generalisations
7. The Shape of Things to Come
Fuzzy front-end and development
funnels

Screen 1

Fuzzy front-end Screen 2

Screen 3

??
? ?
??
? ?
?? Development Launch

Pre-development
investigations
 Generic Product Development process

Research & Technology Technology Capability Project

Development Development Acquisition Acquisition Management

Product
Detailed
Detailed Prototyping ProductTest
Test
Design Prototyping Finalisation
Design Finalisation

Process
Process
Process Process
Process ProcessTest
Test
Product Design Development &&Ramp-up
Product Design Development Ramp-up
Requirements Concept Definition Product
Requirements Concept Definition Product
Capture Development && Launch
Capture Development Launch
Approval Supply
Approval Supplychain
chain Supply
Purchasing Supplychain
chain
Purchasing Development
Preparation Development
Preparation

Distribution Market
Distribution Market
Development Preparation
Development Preparation
Product Development cash flow

End of
Life

Product
Launch

Company Market
Dependent Dependent
Product life-cycle

Volume
Sales
Profits Sales
Volume
Profit New Product Profit

Introduction Growth Maturity Saturation Decline

Time
Smith and Reinertsens work

The Four Economic Objectives

DEVELOPMENT PRODUCT
SPEED COST

PRODUCT DEVELOPMENT
PERFORMANCE EXPENSE
Smith and Reinertsens work
Expense Overrun Cost Overrun

3,500,000 4,000
3,000,000
2,500,000 3,500
Expense

Unit Cost
2,000,000
1,500,000 3,000

1,000,000
2,500
500,000
0
2,000
-2 -1 0 1 2 3 4 5
-2 -1 0 1 2 3 4 5
Year Year

Baseline R&D R&D Expenses Overrun Baseline Unit Cost Unit Cost Overrun

Performance Shortfall Schedule Delay

5,000 5,000
Annual Units

Annual Units
4,000 4,000

3,000 3,000

2,000 2,000

1,000 1,000

0 0
-2 -1 0 1 2 3 4 5 -2 -1 0 1 2 3 4 5

Year Year

Baseline Unit Sales Unit Sales with Performance Shortfall Baseline Unit Sales Unit Sales with Schedule Delay
Product life-cycle pressures

Revenue
Revenue depressed
by Competitive
Price erosion

Late to Life Cycle shortened by

Market
New Technology
J&LR: $65M / Month
Market Segmentation

Time

Budget
Costs

Operational Costs
Overrun
Start-up Costs
New product J&LR: 1% = $4.5M or 45 man years
development Costs
 Timing and impact of management
attention and influence
Index of attention and Influence

Ability to
Influence outcome

Actual Management
Activity Profile

Knowledge Concept Detail Prototype Pilot Production

Acquisition Investigation Design & Test Production Ramp-up
Contents

1. Why is Product Development Important?

2. What is Product Development?
3. Generic Processes and Theory
4. Role and State of Automotive Industry
5. Product Development in Automotive Industry
6. Generalisations
7. The Shape of Things to Come
 Adam Smith: Productivity due to Division of Labour

1770s
Charles Babbage: Mathematical treatment of
organisation of production

1840s
management

FW Taylor / Henry Ford: Scientific production control

by Layout Design, Labour Control, Motion Study

1900s
GM vs Ford: Emergence of Horizontal Integration
& competition through product differentiation

1920s
First Application of Statistical Quality Control
A. P. Slones application of Financial Statistics
Major developments in industrial

1930s

E. Demings teaching: Japan Adoption of TQM

1950s

T. Ohno: JIT and Lean Production

1960s
Development of business strategies
in AI
Tighter Financial Controls
Less investment
Restructuring

SPC
TQM
FMS / CIM / CAD-CAM
Robotics
Automation

JIT / Supply Chain Mgt

Japanese Transplants

Process Re-engineering
Focus on lead-times

Cost PD Capability Design

Differentiation Adoption of
Strategies Quality CE Innovation
Movement Technology
Hybrids
Movement Fuel Cells
Lean
Production Time
Compression Competing
through
Innovation Sustainability
Automotive industry

An industry over 100 years old

One of worlds largest industries
Turn over of $1.4+ Trillion a year
Employing more than 20 Million people

One of the most organised and complex

Innovator of industrial management practices

Over capacity of 20 million units / year

Intense international competition
most systemised in Product Development
Worlds major automotive markets
(2002-06)
One of worlds largest industries
(2007)
W o rld T o p 20 V eh icle P ro d u cin g Co u n tries

Japan
United S tates
P R China
G erm any
S outh K orea
Franc e
B raz il
S pain
Canada
India
M ex ic o
UK
Rus s ia
Italy
Thailand
Turk ey
Iran
Cz ec h Rep.
B elgium
P oland

0 2 4 6 8 10 12
M illions
Top 20 vehicle producers (2007)

Toyota
GM
VW
Ford
Honda
PSA
Nissan
Fiat
Renault
Hyundai
Suzuki
Chrysler
Daimler
BMW
Mitsubishi
Kia
Mazda
AvtoVAZ
FAW
Tata

0 2 4 6 8 10
Millions
Top 10 automakers market
capitalisation (2007) p
( Bns)

0 50 100 150 200

Toyota 158.2
Honda 54.8
Daimler-Chrysler 47.6
Nissan 41.2
VW 30
BMW 28.5
Renault 25.9
Volvo AB 22.4
Fiat 18.1
Porsche 16.8
Over capacity in global auto industry

90
80
70
Million Units

60
50
40
30
20
10
0
1992 1997 2002 2007

Production Capacity
Trends

+ Product Life Cycle Variety

Repeat orders

Batch sizes

_
1970 1980 1990 2000
Drivers of new product development in
AI

1. Environment, fuel prices, sustainability

2. Legislation

3. Intense international competition

4. Extremely sophisticated customers

5. Fragmentation of the markets

6. Inclusion of new technologies

Contents

1. Why is Product Development Important?

2. What is Product Development?
3. Generic Processes and Theory
4. Role and State of Automotive Industry
5. Product Development in Automotive Industry
6. Generalisations
7. The Shape of Things to Come
Vehicle attribute decomposition
A1. Ride
A2. Handling Vehicle
Driving A3. Steering Dynamics
A4. Braking
Experience A5. Performance
A6. Performance Feel & Drivability Perf. Econ.
A7. Traction & Driv.
A8. Off Road Suitability
Safety A9. Towing Ability
A10. Fuel Economy
A11. Passive Safety Safety &
A12. Active Safety Security
A13. Security
A14. P/T NVH
Quality A15. Windnoise NVH
A16. Road NVH
A17. Operational Noise Quality Perceived Quality
A18. Perceived Quality
A19. Resistance To Degradation D&R
A20. Durability & Reliability
Environment A21. Running Costs COO
A22. Creation Environmental Impact
A23. Usage Environmental Impact
A24. Disposal Environmental Impact Environment
A25. Occupant Accommodation
Convenience A26. Seat Comfort Accommodation
A27. Clean Interior & Usability
A28. Daily Life Usage
A29. Exterior Dimensions Infotainment
A30. Controls & Displays HMI & HMI
A31. Day, Night & Poor Weather Vision
Cost A32. Infotainment All Weather
A33. Climate Comfort Comfort & Vision
EA1. Aerodynamics TASE
EA2. Thermal Management
EA3. Weight Weight
EA4. Electrical/Electronic Integration
EA5. Mechanical Integration Elec. Integration
Package
Brand Specific Marketing
Common Marketing/PD Engineering Execution
Level1 Attributes.
Level 2 Attributes
(Volvo Example)
New model development
generic high-level process

Decision & Planning Delivery Phase

Concept
Business Product Programme Engineering Production- Product Volume
Feasibility
Proposition Proposition Approval Development isation Launch Production
& Proposal

Time
Time to market for complete new
vehicle

Time to Market Design Freeze <ST>

Toyota 38 15

Honda 32 18

Mazda (655) 38 18

Nissan 28 19

Ford/J & LR 51 25

Renault 49 26

DaimlerChrysler 39 28

General Motors 36 (SI) 30

 APC Annual Innovation Process
Ford North America Process.
In place since 2003.
Clarifying the
fuzzy front-end of PD
Stage 1 Stage 2 Stage 3
Concept Study Concept Creation Concept Analysis
Dec.- Mar. Apr.-Jul. Aug.-Nov.

APC APC APC

Governance Governance Governance
Marketing / GCI Board Board Board
Annual Strategic

Concept A
Prod Strategy & Plan
Concept B
Project A
R&A
Concept C
Advanced Design
Concept Concept D Project
Advanced Manuf. Consolidation Decision
Concept E
Project B
Auto Strategy
APC Engineering Concept F
Commercial
Business
Technical
Co-Located Creative X-Functional Team
Input from
Cycle Plan
Potential Show Car
Project C
Output to
Cycle
Plan
Focused On New product Innovation
Process Process

Year 1 Year 2 Year 3

Commercial Commercial Commercial
Annual Process
Business Business Business
Total Cycle Plan
Technical Technical Technical
Platform/Programme

PS - 6 PS
Serial Development
Of Particular Platform Pre-PS Activity
Or Vehicle Programme Commercial
Can Use Business
Technical
 Maximising knowledge and certainty

Commodity Menus Technologies Menus

Steering Multi- Steering B C

Brakes
Column media Seats
System
Vehicle
Vehicle
C/D Other
Architecture/
Architecture/
EDS
Water IP /
EGR
Restraint Shared
Shared
Pump Cockpit Electronics Commercial Technologies
Technologies
Engine
Restraints Wheels Driveline HVAC
Mounts
Powerpack Menus
Clutch Suspension
Exhaust Latches TPMS Powerpack11
Powerpack Powerpack2
Powerpack Powertrain
DMF Parts Powertrain
Process,
Process, Architecture
Architecture
Tires
Shocks /
Batteries Methods,
Methods,
FDM Leather Powerpack3
Powerpack Powerpack44
Powerpack
Can use Struts
Tools
Tools&&
Information
Information

Should Pre-Program / Packaging

Should use
GPDS
GPDS
Program
Will use Team
 Design engineering & development

PS PSC PTCC PTC AA1 PIA/AA2 FAA

<GPA>

Product Planning Activity (Study Product Alt.) Pre-DB S1

Annual Activity Pre-PS Activity Dwg UP V0 UP V1 UP V2 S-1 Dwg. DPA
Final
DB

D/F Feas Surf

DNA-D Direction Cube Refinem't
Pre-work
Showcar Strategy Optical Quality Process
Design Benchmarking Concept Design Theme Investigations (Multiple => 3) Theme Design (2 alternatives) Production Design
Stance & Proportion
PCP Support Studies + Derivatives Sketch & 3DCG see-thru physical 3DCG & Model Refine CG & Clay
Technology Development
Requirements Clinic Summary Pre-work CDRM Maunfacture
Prep (fabricate Function Eng /
Pre-work cube & rough
Cube Des Ref
l)

Develop Brand-Specific Aesthetic Create ideas and concepts to anticipate Design program exterior, interior, and under-
Design Language future Consumer requirements the-hood and create CAD geometry
 PS PT PTC
PS M1D PA FDJ LR
C CC

Fit Programme Synchronisation

Can Have -Compatibility-
Requirements Choice 2-Phase
Completeness
Final Data Judgement
development
Development
& Engineering
Enhancements with
GPDS
Digital Pre-Assembly Block Leaders

Faster CAE
 PS PT PTC
PS M1D PA FDJ LR
C CC

Fit Programme Synchronisation

Can Have -Compatibility-
Requirements Choice 2-Phase
Completeness
Final Data Judgement
development
Development
& Engineering
Enhancements with
GPDS
Digital Pre-Assembly Block Leaders

Faster CAE
 PS PT PTC
PS M1D PA FDJ LR
C CC

Design-in Context
Geometric Compatibility Review
Craftsmanship Appearance Review
Appearance Tolerance Evaluation
Serviceability Evaluations
Manufacturability Evaluations
Package Attribute Evaluations
V0 Concept

V2 Structure

V5 Physical Alignment
V1 Architecture

V3 Tooling

V4 Virtual CP
SI SC PA ST PR CC

CAD DATA LEVEL 2

V0 Production
CAD DATA LEVEL 4
V1 CAD DATA LEVEL 4
Release

V2 CAD DATA LEVEL 6/7

V3 CAD DATA LEVEL 7
Geometric Compatibility (Package) V4
Functional Performance (CAE) AP
Manufacturing (Process, Tools Ergonomics) V5
Service (Process, Tools, Ergonomics) CP
Dimensional Analysis (DVA)
Surface Quality (Craftsmanship)
Engineering & Prototyping

Representative UN content

Donor Top Hat aesthetics not important

 VP production and tooling
UP VP Data VP Fixed data publication
UP V2 Data
UP V1 Data Publication Release
Publication
Publication and release points for
Start
all parts
UP V0 Data
VP
Publication
Release
FDJ Complete
UP V0 UP V1 UP V2 VPDwg X
VP Build

Feasibility
The start point Process planning
for each activity
Tool Design
Casting/ raw material + pre machining

Final surface machining,

parts manf + DV test
VP Parts

Parts for PCF/TCF

All Parts Tooling Window

Final Data to parts OK for VP
from Prototype OR Production Tooling
The time for the window is dependent
on the programme scale
Time for
Production Tools
to OK for PCF parts
APATRIC5 7 June 2005
Verification and crash test
Would you like to see the actual crash test clips?
Synchronisation & mass production
preparation
New State Previous State

Tools under
development

Engineering
Delay
By synchronisation of
the complete vehicle
in front of production
releases we get:

Time
Single Point Target
Of Release
Index of attention and Influence Improved PD System

Ability to
influence outcome
Pushing attention to
earlier stages

Actual management
activity profile

Knowledge Concept Detail Prototype Pilot Production

Acquisition Investigation Design & Test Production Ramp-up
Decoupling and Alignment

Time

Cost Quality
Contents

1. Why is Product Development Important?

2. What is Product Development?
3. Generic Processes and Theory
4. Role and State of Automotive Industry
5. Product Development in Automotive Industry
6. Generalisations
7. The Shape of things to come
Product Development: Value-add outputs
Identification of Market Need
Including: white spaces, innovations.
Final Customer

Concept Creation
(Customer Proposition) Marketing /
Sales

Execute the Concept

(Design & Engineering, Test and Build)
Manufacturing

Product Create Technologies

Development
Commodities
Other Customers
Corporation or Companies

Corporate IPR
Knowledge / Technology

Determine brand solution

Product Creation
Capability
Criteria for successful new products

Offer a unique feature

Higher relative quality

Solution to customers problems

Reduction of total customer costs

Being the first of its kind

Product Development system
Process

People Management

PD
System

Tools &
Technologies Organisation
Product Development capability

How fast = speed of development

How Many = throughput

How much investment = cost of development

Product Development capability

PD
Capability

Speed of Cost of
Development Development

Overhead People Hardware Supplier

Costs x time Costs x time Cost Cost
Lead-time
Dependent

Lead-time Constant
Dependent if done to
the best ability

Lean PD
is dependent on Time Compression
PD Capability Metric

Time Compression
i.e. How much can you reduce the lead-time of Product Development

At Program Level : Program Time Compression

Program Performance = tc

At Business Level : Rate of Time Compression

PD Performance = dtc / dt
Improvement limit within given process & technology
PD Performance

Improvement Maintenance of SOP

Time
Sources of Improvement

Environmental changes
PD Performance

Process enabling technology changes

Process changes

Time
 No new Products
=
No future for that company
Effective Product Development

Strategic Advantages

Extension of Profit Margins/Markets

Pre-empting Competition
Setting Standards
Creation of PD Capability
Invigorating People
Enhanced Brand

Company Performance
Effective Growth
Product Development Profitability
Sustainability

Operational Advantages

Lowering Costs
Improving Quality
Reducing Lead-Times
Developing Skills
Enhanced Image
Contents

1. Why is Product Development Important?

2. What is Product Development?
3. Generic Processes and Theory
4. Role and State of Automotive Industry
5. Product Development in Automotive Industry
6. Generalisations
7. The Shape of Things to Come
The shape of things to come
Do you want to see more ?
Apologies for over-running on time !

??
Cumulative flow diagram

Cumulative
Quantity Queue
Departures

Time
Monitoring queues

Arrivals Queue
Cumulative
Quantity Departures

Littles
Theorem

Time
Batch size

Arrivals
BATCH TRANSFER
Cumulative
Quality
Departures

Time Queue
Arrivals

CONTINUOUS FLOW
Cumulative
Quality
Departures
Technology Life Cycle

Industry profitability

Number of firms

cutting State of Advanced Mainstream Mature Decline

edge the art
 No. of Firms

0
20
40
60
80
18
75
18
85
18
95
Dominant Design

19
05
19
15
19
25
Type-Writer

19
35
19
Auto

45
19
55
19
65
Non-convergent technologies

30 Exit Entry Total

25
No of Firms

20
15
10
5
0
74 1970s
75 76 77 781980s
79 80 81 1990s
82 83 84 85 86 87
2000s

Firms participating in US integrated circuits industry

Product-type positioning

Complexity
High Low

Aerospace Cosmetics
Defence Textiles
High Large Buildings Food & Drink
Ship Building Packaging
Jobbing Builders

Risk Automotive
Simple Components
Paper
Volume Consumer Goods
Low Commodity Tools
Conventional M/C Tools
Bulk Chemicals
Pharmaceuticals
Primary Metals
Building Material
 Causes of PD Failure

Moving Policy Functional

Targets Delays Mismatch
Unstable Unresolved policy Inadequate knowledge
Technology Sequential Issues other functional capabilities
Poor Working
Screening Inadequate No Common Organisation
Market resources Vision Structure
changes
Interference
Poor Project Role of Snr. Poor
Too many Management
Execution Changes in communication
projects
requirement

PD
Failure
Poor Idea
Inadequate
Technology Resource Generation
focus Poor
Strategy Planning Not unique
Communication
Marketing
Poor Strategy
Overestimating Technical Long lead time
Lack of Technical Skills
Learning Capabilities Product
Project
Strategy
Screening Low entry barriers
for Competition

Technical Poor Problem

Problems Wrong Product
Solving
MPDS vs FPDS

52
50.2 KO J#1
50 FPDS
45 43
MPDS V1 40 40
40 39 38
MPDS V2
40 38
35 Toyota 38
30 34

25
20 22
15
S6/A6 S5/A5 S4/A4 S3/A3